John DeGoey is portfolio manager, Industrial Alliance Securities. His focus is personal finance and ETFs.
Vanguard FTSE Emerging Markets All-Cap Index ETF (VEE-T)
VEE is my favourite emerging market ETF because it offers broad exposure to multiple economies using an all-cap format and featuring the lowest costs in the space. Emerging markets, in turn, are still realizing mid-single-digit growth when the rest of the world is growing at 2 per cent or less annually.
iShares India Index ETF (XID-T)
Within emerging markets, India is my favourite country because of its high growth rate combined with not having to go through the structural change of trying to transition to a domestically stimulated consumption economy. For those people who want to buy into a single country (rather than my preferred way of buying the entire basket), I'd recommend India.
BMO Emerging Market Bond Hedged to CAD Index ETF (ZEF-T)
ZEF is my one and only bond recommendation, and I use it because my clients need to have an income component. I simply don't trust first-world bonds to offer sufficient returns. I don't think XEF will offer great performance relative to stocks, but the performance relative to most other bond offerings should be compelling. In essence, I believe emerging market bonds win the "reverse beauty contest" of being the least ugly income option available to investors today. If you have to buy income-generating investments in some amount (perhaps due to constraints set out in your investment policy), this may be your best bet.
Past Picks: Oct. 20, 2015
BMO MSCI All Country World High Quality Index ETF (ZGQ-T)
Then: $23.03 Now: $25.00 +8.55% Total return: +9.52%
BMO S&P 500 Hedged to CAD ETF (ZUE-T)
Then: $31.25 Now: $32.91 +5.31% Total return: +6.81%
iShares MSCI Emerging Markets Index ETF (XEM-T)
Then: $24.42 Now: $27.68 +13.35% Total return: +15.75%
Total Return Average: +10.69%
Economic growth is stalling and there is little indication that it will resume any time soon. The only part of the world that is likely to see sustained growth over a long period of time is emerging markets. Traditional equity investments, in contrast, might do comparatively poorly over the next decade or more, since there is really no way left to stimulate growth. Governments and households are both more stretched than ever, the population is getting older and less productive and current interest rates mean traditional first world bond investors might earn negative real returns for most of a generation. Even with all this stimulus and low inflation, overall large macro trends are ensuring that economic growth will continue to be modest in the developed world.